The New Jersey Turnpike Authority is in the home stretch of a $7 billion, 10-year capital improvement program.
The capital plan, unveiled at the height of the recession, has weathered the financial clouds hovering over the state.
The NJTA, which owns and operates the New Jersey Turnpike and Garden State Parkway, has been funding the capital plan adopted in October 2008 through the sale of revenue bonds and servicing the debt with the help of two toll increases.
The authority is also expected to raise an additional $1.3 billion of debt over the remainder of the capital plan, but Fitch Ratings noted in a Jan. 6 report that it is well positioned financially to take that debt on after the 2008 and 2012 toll increases.
The capital program funded improvements that include road widening, interchange improvements and bridge enhancements.
"Overall they have managed themselves well with what they have had to work with," said Howard Cure, director of municipal research at Evercore Wealth Management in New York City. "They are very well managed and have pretty consistent coverage."
The NJTA priced $151 million of fixed-rate refunding revenue bonds on Jan. 14.
The bonds were rated A-plus by Standard & Poor's, A3 by Moody's Investors Service and A by Fitch Ratings.
Proceeds from the sale are refunding the turnpike authority's series 2004B bonds.
"Largely because of the investments made under the capital program, the Turnpike and Parkway are in a state of good repair," said NJTA spokesman Tom Feeney. "The largest expansion in the history of the agency — the widening of the Turnpike between interchanges 6 and 9 — was completed on time and under budget. And despite super storm Sandy and some harsh winters, the Authority has been able to control operating costs and meet or exceed revenue projections."
With just two years remaining in the long-range capital plan, the NJTA increased debt service payments in its 2016 budget by $125 million to nearly $800 million. The authority is also planning to issue $525 million of new bonds in the second half of the year.
"There is a very aggressive capital program going on at the turnpike authority and the toll increases have helped make it happen," said Martin Robins, director emeritus of the Alan M. Voorhees Transportation Center at Rutgers University. "They have accomplished a lot."
Robins cautioned that the struggles of New Jersey's Transportation Trust Fund, which is low on cash, could pose a risk to the NJTA.
Gov. Chris Christie has diverted toll revenues toward the transportation trust fund and New Jersey Transit, and Robins said the authority's success could lead to future diversions.
He said the cash-strapped condition of bus and rail operator New Jersey Transit also creates uncertainty for the NJTA's financial footing.
"It is always somewhat at risk because it is a well-funded organization with a lot of other relatives that aren't as well funded and are always turning to the turnpike authority for help," said Robins, who previously held leadership roles with the New Jersey Department of Transportation, New Jersey Transit and the Port Authority of New York and New Jersey.
Cure said while the NJTA is financially healthy, he is concerned about how the New Jersey's credit conditions could spill over to the authority.
New Jersey has the second lowest bond rating of the 50 U.S. states due to concerns about spending pressures, structural budget imbalance, pension underfunding and weak liquidity.
The state is rated A2 by Moody's and A by both Fitch and S&P.
"The hope is that New Jersey won't need to pull additional monies from the Authority to fund transportation needs not directly related to the authority," said Cure. "This was done in Pennsylvania and has placed their Turnpike Authority in a weaker financial position."
Cure added that the NJTA and other state agencies will be helped by a five-year reauthorization of federal transportation funding that Congress approved in December. Many state transportation authorities had expressed concern about continued federal funding before Congress passed the Fixing America's Surface Transportation Act.
"With a five-year funding program from the federal gas tax along with other federal allocations, there should be some consistency and predictability in federal funding," said Cure. "This should help all state authorities, including the New Jersey Turnpike, in addressing capital needs at least over the next five years."
Moody's noted in a Jan. 6 report that the NJTA benefits from consistent demand for its toll roads, but also cautioned that the agency faces some long-term risks from the New Jersey state government's financial problems. A continued slow economic recovery and high unemployment could contribute to lower traffic and revenue, according to Moody's.
NJTA toll revenue, according to its quarterly report to its trustees, increased to $1.48 billion from $1.42 billion for 12-month period that ended on June 30, 2015. The number of vehicles paying tolls also increased in the same period, 611.2 million from 593.8 million.
Fitch noted that despite recent increases, rates remain "low" for both the New Jersey Turnpike and Garden State Parkway at $0.11 per mile and $0.04 per mile, respectively. This will give the NJTA flexibility to raise tolls again in the near future if needed, according to Fitch analyst Tanya Langman.
The authority is projecting $1.553 billion in toll revenue this year and $200 million in other revenues from EZ-Pass toll transponder fees, concessions and investments.
"The toll increases should position the authority well to complete its capital plan," said Langman. "Going forward there are certainly issues with the state, but with this current capital plan they should be well positioned."
